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Relaxing immigration restrictions could greatly
improve the well-being of people in developing countries, with little effect
on wages

Elevator pitch

Most developed countries have foreign aid
programs that aim to alleviate poverty and foster economic growth in less
developed countries, but with very limited success. A large body of evidence
indicates that the root of the economic development problem is cross-country
differences in the productivity of labor. If workers are much more
productive in one country than in another, the obvious way to help people in
less developed countries is to allow them to help themselves by moving to
places where they can be more productive. Yet immigration laws severely
constrain such movement.

Key findings

Pros

Immigrants can greatly improve their
standard of living, even after allowing for the costs of living
away from home.

If workers are much more productive
in one country than in another, lifting the restrictions on
immigration would produce large efficiency gains.

The estimated net gains from open
borders are about the same as the gains from a growth miracle
that more than doubles incomes in less-developed countries.

Cons

Immigrants are a burden on the social
welfare system.

Immigrants “are not like us”—a loss
of national identity is associated with large inflows of
immigrants.

Author's main message

Allowing workers to move freely across countries
could yield large gains, comparable to a doubling of labor income in
developing countries. Although the immigrant flows would be large, the wage
effects would be small since increases in labor supply would induce
investment. So for policymakers wanting to increase the welfare of the
average person without regard to nationality, relaxing immigration
restrictions could greatly improve the well-being of people in developing
countries. And some of the large gains accruing to immigrants could be used
to pay for whatever costs are imposed on incumbent workers—for example by
levying an income tax surcharge on recent immigrants.